JERUSALEM (Reuters) - Israeli Prime Minister Ariel Sharon said he was
very satisfied with efforts by Palestinian President Mahmoud Abbas to
restore calm and pledged in an interview published on Thursday to
pursue peace with him.

"There is no doubt that Abu Mazen (Abbas) has begun to work," Sharon
told the Yedioth Ahronoth daily.

"I am very satisfied with what I hear is happening on the Palestinian
side, and I have a serious interest in advancing the process with
him."

Abbas, speaking after talks with U.S. envoy William Burns, urged
Israel to agree quickly to a cease-fire with Palestinian militants
and said he was looking forward to holding a still unscheduled summit
with Sharon.

A Palestinian official said Israel had already agreed to free 500 of
some 7,000 Palestinians it is holding. Israeli political sources
confirmed Israel was considering letting hundreds of prisoners out as
a goodwill gesture to Abbas.

In another sign of change after Yasser Arafat´s death, Palestinians
voted in the Gaza Strip´s first municipal election, a test of
strength between Abbas and the militant Hamas, which is popular in
the territory Israel plans to leave this summer.

Abbas, elected president on Jan. 9 on a platform of ending more than
four years of bloodshed, has been pursuing a truce deal with Hamas
and other militant groups. Violence has dropped sharply in Gaza,
raising hopes peacemaking can be revived.

"I intend to advance the chance of a settlement with the
Palestinians," Sharon said. "I intend to be accommodating toward Abu
Mazen while at the same time remaining vigilant and assessing the
situation on their side."

Israel says it will answer quiet with quiet and has shelved major
military operations, but refused to stop selective raids.

But Abbas suggested he needed formal word from Israel that it would
hold its fire in order to get militant factions behind a truce they
insist must be mutual.

"The Israelis have to respond quickly. We cannot wait for a week or
two," Abbas said in the West Bank city of Ramallah.

LACK OF TRUST

Abbas and Sharon are expected to meet next month for talks likely to
focus on coordinating the planned pullout from the Gaza Strip and
ways to restart a U.S.-backed peace "road map" charting incremental
steps toward a Palestinian state.

In Washington, Israeli Foreign Minister Silvan Shalom spoke of "a
deep lack of trust between the sides" that must be rebuilt step-by-
step.

Shalom, speaking to Army Radio after meeting newly confirmed
Secretary of State Condoleezza Rice, said it would be unwise to jump
straight to negotiations on a final peace treaty.

He also said a truce in itself, without any move by Abbas to disarm
militant groups as stipulated by the road map, was no solution.

"A cease-fire is a ticking bomb that will explode in our faces.
Therefore a cease-fire cannot be a long-term goal -- certainly not
when (militant factions) are preserving their infrastructures,"
Shalom said.

Across the Gaza Strip, thousands turned out to vote for candidates
vying for 118 seats in 10 municipal councils.

"The election is our way of getting rid of corruption," Mohammed Abu
Harbeed, a supporter of pro-Hamas candidates.